Every few months or so, David Peace and I meet at that grandish pile of swank, made even grander during the city's rebirth as a shiny shoppers' paradise. The man who invented a new genre of fiction – "Yorkshire noir" – is back in town. After his decade-long exile in Japan, the prodigal son has returned, like Ed Dunford in his first novel, 1974, to find that things have changed. Once the region's boomtown, Leeds is now a synonym for the fall. Outside the hotel, there are holes in the ground. New buildings have been mothballed. Thousands of new flats lie empty. The cuts are in place; the harrowing of the north is upon us. "The darkness," Peace notes, "is back."

But, whisper it softly (whispering it softly is very much the Leeds thing), while he was away there has been something of a literary renaissance. A new generation of edgy provincials is about to storm the citadels of London, throwing itself about town and flaunting its talent. Or at least it would be if it could be bothered to get on the train. For it appears to be afflicted by Billy Liar Syndrome; in Keith Waterhouse's classic tale, William Terence Fisher bottles it when his freewheeling girlfriend offers him the chance of a swinging time in the Big Smoke. Getting on the train is, of course, a metaphor for aspiration.

The words "Leeds" and "literary" are rarely, if ever, used in the same sentence. As a Harry Enfield character once mocked: "Don't talk to me about sophistication – I've been to Leeds." And yet, in the 60s, that golden age of aspiration, Waterhouse was part of a crack force of prickly outsiders who barged through the privileged ranks of the elite.

A disproportionate number of these iconoclasts were from Leeds and its surrounds: Waterhouse, Alan Bennett, Tony Harrison, Willis Hall, David Storey, John Braine, Stan Barstow . . . throw in Jack Higgins and Barbara Taylor Bradford (and, at a stretch, Barry Cryer, who formed an unlikely comedy duo with Harrison) and you have the Leeds Movement.

Never heard of it? That could be because, unlike the Merseybeat Poets or the Madchester Sound, it was never officially acknowledged. "It's something to do with a lack of self-identity," Peace explains. "It's the same with music. Manchester and Liverpool have clearly defined music scenes. But while Leeds has had great bands, it has never really had a scene."

This anonymity is all part of the charm. On my last visit to Elland Road, Leeds United's football ground, I bumped into Bernard Hare, whose disturbing memoir Urban Grimshaw and the Shed Crew, about underclass kids growing up in east Leeds during the 1990s, was hailed as an instant classic. "I've become a recluse," he smiled, anticipating the haven't-seen-you-in-yonks question. "Leeds has hugely influenced writing and thought," argues Mick McCann in How Leeds Changed the World. "It's just that no one seems to know it. It's part of our Leedsness not to blow our own trumpet. To keep our feet on the ground, to not show off, to never get ideas above our station."

This is only part of the story. Personally, I think Dickens's "beastly place" – much to the horror of its civic boosterists – revels in its image as a grim, sullen, down-to-earth, anti-intellectual, proudly independent, no-frills, dark and gritty city. Peace's characters in his astonishing Red Riding quartet frequently toast each other with the words: "To the north, where we do what we want!"

The new wave of West Riding iconoclasts – Peace, McCann, Caryl Phillips, Kester Aspden, Dave Simpson, Alice Nutter, Boff Whalley, Ian Duhig, Wes Brown, Tom Palmer, Robert Endeacott and John Anthony Lake – do what they want. I interviewed some of them for my book Promised Land, a cultural history of Leeds United, and they all made it clear they wouldn't want to belong to a movement. This, I suppose, is what makes them iconoclasts. Like the Waterhouse generation, they write about escaping a life of provincial confinement. Some have escaped – but they all seem to return, in their writing at least, to the dirt and the darkness. Brown's Shark depicts an underclass struggling to belong, grafting for its patch. Aspden, Phillips and Duhig have all written movingly about the murder of rough sleeper David Oluwale, one of the most notorious racist crimes in British history. "I think that darkness comes from growing up in West Yorkshire in the 1970s," Peace says. "It was a dark time: not just the Ripper, police corruption and miscarriages of justice, but economically and politically."

As the city braces itself for another big hit, a harrowing that will put Thatcher's assault in the shade, he finds it reassuring to meet up for the occasional cuppa in the Queen's Hotel, the art-deco meeting place of his heroes, the old Leeds literati. Bennett, Storey, Harrison and Waterhouse all used to stay there before boarding the train to London. "When I was growing up, I would come into Leeds every two weeks or so with my mum and dad. They would go shopping and then to the Queen's for a cup of tea, pretending to be posh."

I, too, can remember special trips there as a boy. My dad would delight in telling me that the hotel was white underneath its filthy, blackened coating. When he worked there, as a clerk, he used to leave through the side entrance leading directly into the station. There was a sign that bore the legend: "Leeds, The Promised Land Delivered". The sign was taken down sometime in the mid-80s.